Ricza, Jade (SEN)
From:	Harris, Lee [Lee.Harris@team.telstra.com]
Sent:	Thursday, 25 January 2001 5:07 PM
To:	'super.sen@aph.gov.au'
Subject:	SUBMISSION TO THE SENATE SELECT COMMITTEE On Superannuation and F inancial Services

Importance:	High
Dear Sir/Madam,

	I wish to represent to the Committee a recommendation that changes
be made to the method of Indexation of some Superannuation Schemes (such as
the Commonwealth Super Scheme - CSS). The Indexation method which currently
ties changes to movements in the CPI acts against the protection of the
investment of the individual contributor to these schemes.

I quote one of the Terms of Reference:
"a) prudential supervision and consumer protection for superannuation,
banking and financial services;

As the intent should be to PROTECT consumers against erosion of their
investment, a change should be made.

The basis for my recommendation is a concern that the Consumer Price Index
(CPI) usually does not reflect the true and total increase in the cost of
living for a person receiving a Superannuation Pension. I also firmly
believe that CPI can easily be manipulated for political purposes such that
it is often considerably less than a fair and accurate indicator of the true
cost of living changes that have occurred.

Figures that show the CPI in comparison to the total and true percentage
increase in the amount of all "living costs" ( including Fuel, Food, Rates
and other charges that could usually be expected to be a cost of living for
a Superannuant) almost always show a substantial difference.

The outcome is an erosion of the value of the Superannuation Pension. This
erosion of buying capacity is not acceptable, as I believe that the INTENT
of indexation is to properly and ethically maintain the standard of living
for the superannuee.

I note that a comparison between CPI and AWOTE over a period of
approximately four years shows the following severe discrepancies:

CSS pensions have been indexed by:
	- 1.3% in '97;
	-  0% in '98 (CPI was actually -0.2% whereas the Macquarie Bank's
retirement index was 5%);
	- 1.1% in '99 (CPI was actually 1.3% but the pension rise was
discounted by 0.2% for the previous negative CPI);
	- 2.8% in '00.  

Over the same period, the movements in average weekly earnings (AWOTE) were
3.5%; 4.3%; 3.2% and 4.4% (source: Personal
Investment). This rep[resents a huge difference.

Over the period of these 4 years it could be expected that a retiree who
initially was paid a pension of around $25,000 p.a. would now be receiving
around $1,000 p.a. less than they would have received had their pension kept
pace with AWOTE.

The CPI is a poor index for those who are retired, as witnessed by other
retirement indices (ASSIRT, Macquarie Bank) that are invariably higher
than CPI.  

I have been made aware that politicians'  Retirement schemes have indexation
based on AWOTE movements. This principle of indexation based upon AWOTE
should be applied to other schemes as well.

Please consider this submission.

Yours Sincerely,

(Mr.) Lee Harris
11 Colville Street,
BATHURST.    2795
Tel: (02) 6332-6666